Saturday, April 15, 2017

Miskolc Miskonnection




This is a short story from my travels in Europe, summer 2013.


I’d just had a treat of a weekend with the lead singer of a punk band in Eger, Hungary. This came as much of a respite after the confusion of the capital city, where I’d met the singer, Robert, at a free concert. Rob’d promised me there was much more to Hungary, and we’d delighted in the history of the Magyar people while gorging on “bachelor-snatching” soup in his hometown. Now, if you really wanna hear about some uncomfortable shit, talk to someone in a punk rock band. Emboldened by my host, I decided to make Slovakia my next destination.

So here I am at the Miskolc train station at the last major stop in Hungary with a backpack that’s way too big. I’d just gotten off a payphone where I wasted more than a fair share of pocket change trying to figure out how to call my grandparents. I’m starting to lose patience. Approaching the ticket counter, the timetable above makes no more sense to me than when I’d arrived. I slam down my overweight bag on the ground, take a breath, and try to look presentable to the wary lady behind the counter.

“Excuse me, when does the next train depart?”

The lady returns fire in her own language, marking the barrier between us to be more than plexiglass.

Luckily, I’m a well-seasoned international adventurer. We have ways of bridging such divides.

I point to my watch. “WHEN…?”
I start chugging my arms like a locomotive. “… TRAIN… ?”
I snap my finger northwards. “… GO?”

The lady is very obviously impressed. She points her own finger. At me.

This isn’t going as I’d hoped.

“Uh, yes, me. I want to go to Slovakia. Please.”

She gives me an exasperated look and points her finger harder. “Gibbledy gobbledy gook,” she says.

Not only am I widely traveled, I’m also culturally sensitive. That’s why I’m shocked at how rude this lady is being. It’s pretty poor manners to point your finger at someone, especially if they’re a foreigner and they’re lost.

Then it dawns on me. In movies, the train blows a whistle before it departs. At the last major station in Hungary, they just close their doors. And that’s what the train behind me is doing now.

No time for pleasantries. With a heave, my bag is up and I’m huffing as fast as I can to the platform. It’s only after the fact that I remember that running over train tracks is frowned upon. So is banging my fist on the wrong side of the train. Someone opens the door to have a word with me.

I get on. I have no idea where I’m going.



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Saturday, April 8, 2017

Tax Information for Americans Abroad




Edit: many of the specifics for filing taxes will change each year, but the overview is largely the same.
Dear U.S. citizens living and working in a foreign country,
Don’t worry about your taxes.  I mean, yeah you still have to submit files to the IRS, but don’t worry about it.  I’ll tell you the basics you need to know in the same amount of time it takes to overcome your panic attack from hearing the word "taxes".

**(obligatory disclaimer at the end)**

Of course, none of this applies to you if your income was less than $10,350 this year. [2018 edit: this is now $10,400 for single people under the the of 65].  Check out these tax instructions, Chart A on page 8 (https://www.irs.gov/pub/irs-pdf/i1040gi.pdf).  

For everyone else, it’s not too late.  Unless you’re reading this after June 15th, in which case it is.  But, that’s kinda on you.

Keep in mind that if you are Self-Employed or identify as a Digital Nomad, you can stop feeling so smug about it because taxes could be a lot more complicated for you.  I’m not going to address your situation… and I’m certainly not going to address you as a Digital Nomad.  

This information applies to Americans abroad employed by foreign businesses or governments -  such as English teachers, backpackers on a Working Holiday visa, and/or legal prostitutes.  This information also applies to American students studying abroad for an extended time; for example, on a Fulbright scholarship.  

Here's an overview of what I'm gonna cover:


  • Your main tax document, Form 1040.  
  • How (legally) not to pay taxes, Form 2555-EZ.  
  • The easy healthcare stuff, Form 8965.  
  • How to submit your taxes late, up to June 15th .  
  • Some options for actually filing to the IRS.




 By the way, this information is available on the IRS.gov website:

U.S. Citizens and Resident Aliens Abroad (https://www.irs.gov/individuals/international-taxpayers/u-s-citizens-and-resident-aliens-abroad).  


I’m just gonna make it more approachable.

If you really want to get into the grime of the tax technicalities, check out...

Publication 54: Tax Guide for U.S. Citizens And Resident Aliens Abroad (https://www.irs.gov/pub/irs-pdf/p54.pdf)

Publication 54 covers everything you need to know. Has a nice ring to it. Publication 54.

Ok,  I’ve thrown a few gross IRS sources at you.  Don’t worry about them for now, they’re there for your reference.  Let’s figure out what situations apply to you. We’ll work backwards and put it all in order at the end.

First of all, the deadline to submit your taxes to the IRS is April 15th.  However, if you are living in a foreign country, you qualify for an automatic 2 month extension on your due date.  Don’t believe me?  
Automatic 2 Month Extension of Time to File (https://www.irs.gov/individuals/international-taxpayers/u-s-citizens-and-resident-aliens-abroad-automatic-2-month-extension-of-time-to-file)


All you have to do is attach a statement to the end of your taxes that says, “I am living outside of the United States and Puerto Rico and my main place of business or post of duty is outside the United States and Puerto Rico.”  You probably should include photocopies that can prove this, like rent checks and/or pay stubs.  A pic of the visa stamp on your passport wouldn’t hurt.

Now it’s time for the nitty gritty.  Your hallelujah headache.   What am I talking about?  Why nothing other that the…


Form 2555-EZ, Foreign Earned Income Exclusion (https://www.irs.gov/uac/about-form-2555ez)


The little “EZ” at the end of the form means it’s an exclusion.  That’s good news: it means you don’t have to pay taxes. Now, that’s pretty damn good.  The bad news: you don’t qualify for tax rebates. No money is coming back to you this year.  Win some, lose some.
Here’s how you can snag this wonderful exclusion…
  • “You are a U.S. citizen or a resident alien.
  • Your total foreign earned income for the year is $101,300 or less.
  • You have earned wages/salaries in a foreign country.
  • You are filing a calendar year return that covers a 12-month period.
  • You didn’t have any self-employment income for the year.
  • You didn’t have any business or moving expenses for the year.
  • You aren’t claiming the foreign housing exclusion or deduction.”
If you have earned less than $101,300 while living and working in a foreign country, then you may qualify for this golden ticket.  If you have earned more than $101,300 while living and working in a foreign country, then hit me up, dude, let’s party.

Time to file the 2555-EZ.  You made less than $101,300… great!  (uhh)

There’s still some major boxes you have to check.  First of all, are you a Bona Fide Resident?  Don’t know what the means?  Neither do I.  It’s complicated and I haven’t figured it out.  But you don’t need it, so don’t worry about it.  If you are really curious about it, plug into Publication 54 and scroll down to page 14.  You won’t, though, when you hear about the…

Physical Presence Test!  This bit is the real question.  Have you spent at least 330 days in a 12-month period outside of the U.S.?  There’s two ways to figure it:

  1. Add up all the days you were outside the U.S. and make sure it is at least 330.  You’ll have to do this if you returned to America and then left again.
  2. You have a day you left the U.S. and didn’t return for a whole year.  This can be any consecutive 12-month period.  The period doesn’t have to start in January, it just has to encompass most of the tax year.  For example, I reported 16/March/2016 - 15/March/2017.  Keep track of what you claim for next year’s taxes (which you should be doing anyway).
Got it? Great!  Take a breather, that was the tricky bit.  It’s pretty straightforward from here.

 No, not really.  It’s still complicated.  Thought I’d try to cheer you up a bit.

 Now, the next question asks about where your “tax home” was.  This is just to make sure that you are not making money with a U.S. business while spending it all in a foreign country.  Here’s how the IRS puts it:
“Your tax home is your regular or principal place of business, employment,or post of duty, regardless of where you maintain your family residence. If you don't have a regular or principal place of business because of the nature of your trade or business, your tax home is your regular place of abode (the place where you regularly live).”  

 Take note, Digital Nomads, because this is exactly where I’m not going to give you advice.

 The rest of the 2555-EZ just has to do with who employed you and how much money you made. There is math involved, but I’m not gonna hold your hand.  Let’s go to the next form.

 ObamaCare!  TrumpCare!!  Who cares, amirite???

 Yeah, actually the government cares.  A lot.  Don’t worry, though, if you qualify for the 2555-EZ, then you get an exemption.  It would be nice if it was automatic when you file the above form, but if you want to cover your bases, make sure you include the…
Form 8965, Health Coverage Exemptions (https://www.irs.gov/uac/about-form-8965)
Again, easy.  Any month you were in the States is a Code B Exemption (short coverage gap).  Any months you were outside the States is a Code C Exemption (citizens living abroad).

Oh, and tax exemptions and income exclusions aren’t exactly the same thing.  Whatever.

 Done.  On to the next one.

 Here we go, the original form, the form from which all other forms emanate.  Think of Freeza in his floating chair when the Ginyu Force was still striking poses.

 *Ahem*.  Moving right along…
Form 1040, U.S. Individual Income Tax Return (https://www.irs.gov/pub/irs-pdf/f1040.pdf)


Honestly, this form is a doozy.  And there are too many instructions out there for me to tell you how to fill it out.  Ok ok, I admit I’m being lazy.  But do you really want to read much more?  Let’s finish ourselves off.  Yes, I meant what I said.

 I’ve given you an overview of what tax forms you need to file as an American living abroad and earning income from a foreign business or government.  Now, we have to actually get this information to the IRS.  Would be real nice if this was easy or cheap.  It’s not.  If you want to file cheaply, it won’t be easy.  If you want to file it easily-ish, it won’t be cheap.

 The IRS gives us a couple options on how to submit our information:
First, we can physically mail it in like Cro-Magnon cavepeople.  In one of those vanilla/brown paper envelopes (kinda orange, too, if you ask me), arrange the documents in this order:

  • Form 1040, U.S. Individual Income Tax Return
  • Form 2555-EZ, Foreign Earned Income Exclusion
  • Form 8965, Health Coverage Exemptions
  • Automatic 2 Month Extension of Time to File (with proof, if after April 15)
Then, tie it to your most trusted carrier pigeon, and whisper softly in its ear:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA
Second option, file it electronically.  Believe me, this is not as straightforward as it sounds.  There are free federal tax filing websites out there, but I can’t find any that will include a 2555-EZ.  Here are the three I tried. They all require you to sign up and input personal information, like your Social Security Number.


TurboTax has multiple services and sites, all endorsed by the IRS.  The free one, which may or may not include the 2555-EZ, is currently called the “Freedom Edition.”  You can’t sign in to this service if you have previously made an account with TurboTax.  Well, you might, but you have to use a different email and start over from scratch.  If you have already filed with TurboTax in the past, as I have, and you don’t want to make another account, then you have to use their “Deluxe” version.  This is what I ended up doing.  It costs $55.  Sucks.  And you don’t get a rebate.  There is a silver lining, though, and that is you get a free credit score report which doesn’t affect your rating. Yay.  
Despite my gripes, it is easy to use if you’re willing to pony-up some schmeckles.

You can fill out, file, and print your 1040 for free, but that kinda defeats the purpose because it doesn’t support Form 2555-EZ.  The site is endorsed by the IRS, which counts for something.

This site is cumbersome, but you can download and print any tax document at any time.  So if you only want to fill out some info using their online forms, then print them out and do the rest by hand, this is a good option.  However, I don’t know if they will sumbit it electronically for free.  And it’s not explicitly endorsed on the IRS’s lookup tool.  Again, this site is a pain in the ass to use.


Oh yeah, speaking of that IRS software lookup tool:
Good luck with that.

Alrighty, folks.  That’s it for me.  This is a weekend’s worth of research condensed into a painful ten minute read.  Anyone that found it even remotely helpful definitely owes me a beer.


**Disclaimer: I am not a tax professional and I’m not getting paid to provide this information.  I’m just trying to give a tax overview for Americans working abroad and save them some stress.**



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